Unit 4.5 - Exchange Rates
What you need to know and understand:
Key concepts:
Concepts to understand:
- Floating exchange rates
- Determination
- Depreciation and appreciation of a currency
- Determination
- Changes in demand and supply for a currency—factors including:
- foreign demand for exports
- domestic demand for imports
- inward/outward foreign direct investment
- inward/outward portfolio investment
- remittances
- speculation
- relative inflation rates
- relative interest rates
- relative growth rates
- central bank intervention
- Consequences of changes in the exchange rate on economic indicators, such as:
- the inflation rate
- economic growth
- unemployment
- the current account balance
- living standards
- Fixed exchange rate
- Devaluation and revaluation of a currency
- How fixed exchange rates are maintained
- Managed exchange rates
- Overvalued currencies
- Undervalued currencies
- Fixed versus floating exchange rate systems [HL only]
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- The increased interdependence of economies has benefits and costs.
- Increased economic integration may result in efficiency, welfare gains and improvements in economic well-being but the benefits may not result in equity.
TEXTBOOK unit 4.5
Answer the Exchange Rates Questions first...then watch the video!
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